Case Study: The Home Depot
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Case Study: The Home Depot Preface This Essentials of Strategic Management assignment has been made by three persons which have been working together and individually to finish the assignment properly and in time. Secondly, we would like to thank the company whose websites we were able to visit and use, to get additional information that we could use for leading the assignment of Home Depot to a successful ending. We can say, that it was a pleasure to work on this assignment and would, in the third place, like to thank each other. The persons who worked on this assignment, for the effort and time that is put in the assignment, that brought us to this finished version. Content 1.Preface 2.Introduction 3.Problem definition 4.Summary 5.Conclusion 6. Chapter 1: External analysis of Home Depot Inc. 7. Chapter 2: Internal analysis of Home Depot Inc. 8. Chapter 3: Strategic forces. 9. Chapter 4: Core Competencies Home Depot Inc. 10. Chapter 5: Distinctive Competencies Home Depot Inc. 11. Chapter 6: Competencies transferred to different markets 12. Chapter 7: Large box (endless selection) versus smaller stores 13. Chapter 8: The home improvement industry. 14. Chapter 9: Corporate Stock 15. Chapter 10: Competitor strategy 16. Chapter 11: Corporate Strategy 17. Chapter 12: The corporate culture of Home Depot 18. Chapter 13: Strategic Managers 19. Literature list 20. Enclosure Introduction. During the lesson we had the opportunity to read quickly through some of the cases. The reason why we have chosen the Home Depot case is first of all that the home improvement industry appealed to us. Maybe not the industry itself, but the fact that we have never written a paper or did research for the home improvement industry. By choosing the Home Depot case to write a paper about, seemed a good way to us to enlarge our knowledge about the (US) home improvement industry. The knowledge gained might prove to be useful in the future.
Their strategy is to send professional shoppers to check on which price level the competitors are selling the same products as Home Depot is selling them for. Home Depot does this regularly, so that they can anticipate on a lower price of the competition when needed. For the biggest part of the pricing strategy Home Depot is following, they extremely depend on their suppliers. That's why they have a large number of suppliers, which actually, co-operate very well with Home Depot. Home Depot has about 5,700 vendors, from which they request a very high effort. There are very strict rules that the suppliers have to follow to be and to stay a supplier. They can keep on requesting this very strict rules and asking this very high effort of its suppliers, because they give in return a tremendous turnover. This is once tested by an independent investigation company in a survey at a lot of manufacturers. Home Depot's Product Range: Home Depot has a very wide range of product that they are selling on the market for home improvement contractors, building maintenance professionals, interior designers, and other professionals. Further on, they have their product range for Do-It-Yourself customers (DIY customers), Buy-It-Yourself customers (BIY customers). Their product range exists out of about 40,000 to 50,000 products. This is including differences in colours and sizes. What is so important next to their big variety and their wide range is the brand of the product. Home Depot sells products with brands that only they are allowed to sell on the market. They also sell products with their own Home Depot brand name. By following this strategy, they take care of the fact that products can not be copied by their competitors. Home Depot's Human Resources Policy: We can say that Home Depot has very high skilled employees. They are following several strategies to employ people that share a commitment to excellence by emphasizing the importance of the individuals to the success of the company's operations.
The culture of Home Depot is one that follows the strategy of the company. The strategy Home Depot is deploying is a cluster strategy. This strategy means that Home Depot kind of like cannibalize sales of existing stores in a single market area by putting another store in this area. This results in a higher entrance barrier for competitors and spreads advertising and distribution costs over more stores. This is all confirmed by the following statement of Merrill Lynch: "Home Depot's entrepreneurial culture and heavy dedication toward customer service, Combined with its large merchandise selection, has resulted in a retailer that leads its Industry by almost every performance measure". Theory of Goffee and Jones applied on Home Depot's corporate culture. There are many theories known to describe the corporate culture of a company. We would like to use research performed by Goffee and Jones. This theory is chosen by us, because we have seen it before and are a little familiar with it. Another reason why we chose to use this theory, is because the emphasis in these theory is on people (employees). This is in our opinion a good reason to take this theory, because as mentioned before, Home Depot is really focused on its personnel. Of course, a theory is not perfectly clear. Choices have to be made, sometimes a company is in between some dimensions. Al the theories we are familiar with have this shortcoming, in our opinion all theories have this. But so be it. Goffee and Jones have identified 4 different cultural types. These four different cultures are all built on 2 dimensions. These two dimensions are: sociability and solidarity. According to the two researchers these two dimensions underlie organisational cultures. Sociability: This dimension is a measure of friendliness. If this factor is high, it means that people do things for one other without expecting something in return and relate to each other in a friendly, caring way. Sociability is consistent with a high people orientation, high team orientation and focussing on processes rather than outcomes. Solidarity: Solidarity is a measure of task orientation.
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